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Xiaomi Corporation (HKG:1810): Is It A Smart Long Term Opportunity?

Simply Wall St

As Xiaomi Corporation (HKG:1810) released its earnings announcement on 30 June 2019, analyst consensus outlook appear cautiously subdued, as a 5.7% rise in profits is expected in the upcoming year, compared with the higher past 5-year average growth rate of 38%. Presently, with latest-twelve-month earnings at CN¥14b, we should see this growing to CN¥14b by 2020. Below is a brief commentary around Xiaomi's earnings outlook going forward, which may give you a sense of market sentiment for the company. For those interested in more of an analysis of the company, you can research its fundamentals here.

Check out our latest analysis for Xiaomi

Can we expect Xiaomi to keep growing?

The longer term view from the 23 analysts covering 1810 is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To understand the overall trajectory of 1810's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

SEHK:1810 Past and Future Earnings, August 21st 2019

From the current net income level of CN¥14b and the final forecast of CN¥22b by 2022, the annual rate of growth for 1810’s earnings is 20%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of CN¥0.79 in the final year of forecast compared to the current CN¥0.84 EPS today. However, the near term margins may change heading into 2022, from the current levels of 7.7% to 6.8%.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Xiaomi, I've put together three fundamental factors you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Xiaomi worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Xiaomi is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Xiaomi? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.